The downturn in many sectors of the economy over the last 2 years has made most companies nostalgic for the high-flying days of the mid-to-late 90's. Even though consumer spending has remained robust, capital spending reductions and overall business caution have forced many companies to tighten their belts in the hopes of brighter days to come.

All is not lost! It is often true that we can make our most effective strategic adjustments and investments when the market forces us to pause and catch our breath. There are plenty of valuable pointers available if we observe the moves being made by some of the large, intelligent companies that lead our economy.

In a USA Today article last November, General Electric's Jeffrey Immelt announced his first major initiative for the company since assuming leadership from Jack Welch in 2001. GE will rely on heavy investment in Research and Development. This certainly is not a first for GE, but the increased emphasis on R&D is based on Immelt's clear understanding of what it takes to succeed during periods of slow growth and increasing price pressure in worldwide markets. Innovative new products generate three major benefits:

1. A means of protecting profit margins
2. The ability to capture additional market share
3. The impetus to expand your existing markets

This trio of benefits can be just what a company needs to help it through tough times. Mr. Immelt expects that the overall business climate could remain slow for as long as five years, so we all need to stop waiting for any grand resurgence in the business climate and start running our companies according to today's rules. GE's focus on product leadership is likely to support the company's aspirations to continue as one of the most profitable companies in the world.

In the discount retail environment, Walmart is taking over the world! In addition to its discount retail sales, Walmart passed Kroger as the nation's largest grocer in 2000. There seems to be no limit to the growth opportunities for this chain. They have 3,200 stores in the US, 1,100 international outlets and are expanding store space in 2003 by 8% through their Supercenter concept.

What lies at the heart of this ability to aggressively pursue growth in the face of a slower business cycle is common knowledge. In fact Walmart's long-term strategy thrives in hard economic times. In the company's own terms, "We want our customers to trust in our pricing philosophy and to always be able to find the lowest prices with the best possible service".

Clearly, every shopping experience in a Walmart does not measure up to the service and satisfaction standards of a visit to the Ritz Carlton. However, the low prices keep us coming back — again and again — for all of those items we know we could buy in another outlet at a higher price. Walmart's emphasis on operational excellence allows them to win the commodity pricing game for the mass market and, with the globalization of inexpensive sources for consumer goods, positions them for continued, profitable growth in the years ahead.

The automobile market is such a huge component of the US economy that we are likely to learn something else about "successful strategies in trying times" by evaluating the moves made by a few of the big players. In this particular industry, the competitive landscape is providing some valuable insights into what NOT to do.

A recent Business Week article described how automobile production for the US market is scheduled to increase to 24 million vehicles in the next 5 years. That's almost 7 million more vehicles than were sold in the US during the 2000 peak. GM's Vice-Chairman Robert Lutz believes "Someone is going to be disappointed". It appears that overall automobile industry profits are heading for a disaster suggestive of the airline industry! Who is likely to come out on top?

The Japanese leaders, Toyota and Honda have momentum on their side. They have continued to gain market share through good times and bad for many years. Now the import automakers are aggressively targeting the truck and SUV markets that have provided the lion's share of the US automakers' profits for many years. If the Japanese contenders can continue to bring the features, reliability and quality of design to the larger vehicles that they have traditionally brought to the passenger car market, it will be especially challenging for Detroit's Big Three to ward off additional market share gains.

Of the Detroit-based contenders, it appears that GM's cost structure will be beneficial in keeping them competitive. For the profitable sectors of trucks and SUV's, the winner must be able to deliver the vehicles that people want, at a reasonable price, while trading on the American consumer's loyalty to US-made products for their large vehicle purchases. Coordinating all three of these considerations is daunting to say the least. Few car companies these days enjoy the luxury of focusing on a simpler concept for business success.

So in addition to innovative products and the low cost structure that enables low prices, how else can a company pave a road to solid financial performance in the slow times? There is yet another theme that can help your company: Connect more closely with your customer!

Since its inception, IBM has focused on getting to know its customers extremely well and providing them with solid products and services. Its long-term success has emphasized finding ways to do more for each of the valuable customer relationships it establishes. Share of Customer has always been a focal point for the company's success.

IBM is now uniting several different initiatives to solidify their hold on their customer base. Two ad campaigns in the last several months have made it clear how IBM intends to grow their business. First, the company promoted its "on-demand computing" capabilities — the idea that we will no longer need to worry about the complexity of managing our computing system needs. IBM will provide computing power as-needed and, to the user, it will be as simple as turning on the faucet for a glass of water.

This strategy is dependent on the widespread acceptance of "grid computing" — a concept that hinges on the fact that, most of the time, computers do not take advantage of their full computing power. Critics argue that there are still too many obstacles for implementation of this idea, but allow that IBM may be the company best positioned to pull it all together.

Second, IBM's "deeper"-themed ads for their Business Consulting Services tout the ability to provide for all of a company's consulting needs "delivered on-site, outsourced or on-demand". Successfully combining these two initiatives would provide tremendous value to IBM's customers. In effect, IBM would be helping to direct the most important decisions of their client companies and then providing them with the technology tools necessary to carry them out. The integration of these two steps is likely to find many interested parties in the business world.

All of the above examples serve to illustrate the basic principles espoused in the book The Discipline of Market Leaders by Michael Tracy and Fred Wiersema. First published in 1995, the book exhorts us to "Choose your customers, Narrow your focus, Dominate your market". These three simple modes of focusing your business are just as true during difficult business cycles as they are during the boom times. If you find your business is still reeling from the difficulties exacerbated by the slow market, take some pointers from the market leaders and show the discipline to choose how you are going to succeed in the years ahead.

Steve Rutan is a consultant with the Center for Simplified Strategic Planning, Inc. He can be reached via e-mail at

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